Ministry of Textile has taken up the matter of pending Rs 120 billion refunds with the Ministry of Finance for which different proposals are under examination for clearance of claims. Finance Ministry, Federal Board of Revenue (FBR), Ministry of Textile and State Bank of Pakistan (SBP) are working on resolving this major impediment to export growth.
Sources in Textile Ministry said that the Ministry of Finance has released Rs 1 billion to the textile sector during current fiscal year for clearance of pending refund claims which is not adequate to address the liquidity issues facing exporters.
For all export sectors, the overall pending refund claims of Rs 200 billion include: (i) sales tax refund claims including deferred claims of around Rs 125-130 billion; (ii) customs duty drawback of around Rs 20 billion; and (iii) income tax refund claims of Rs 50 billion.
Textile sector's pending refunds are Rs 45 billion under sales tax, Rs 10 billion customs duty drawback and Rs 32 billion Prime Minister's incentive package for exporters under textile policy 2009-14.
Sources further revealed that the previous government had released Rs 4.5 billion to textile sector under duty drawback and under the PM package in 2016-17 and Rs 25 billion in 2017-18.
Different proposals are under examination for clearance of pending refunds.
One proposal is that the sales tax refund claims and customs duty drawbacks may be paid by State Bank of Pakistan through authorized dealers immediately at the time of realization of export proceeds.
The second proposal is to issue bonds in a phase-wise manner to exporters for clearance of pending clams.
Sources added that the FBR is issuing refunds of only those sales tax claims where Refund Payment Orders (RPOs) were issued, verified and reconciled. There is an inconsistency of Rs 50-75 billion between the pending refund claims of FBR and exporters.